It is fair to say that last year’s revision of Article 257 of the Penal Code has sent ripples throughout the arbitration community that are still felt, seven months later.
It was not long before visions of arbitrators and experts being locked behind bars for some alleged lack of impartiality flooded the UAE arbitration community, with many fearing the end this mode of dispute resolution in the UAE as we know it.
Others offered a more optimistic approach, of there being not much to worry about, suggesting that, surely, the actual jailing of arbitrators or experts requires far too many loops for a ‘bad loser’ of a party to jump over, before its guerilla tactics materialise.
However, both the optimists and the pessimists appear to have joined forces in trying to lobby for the repealing of Article 257 or perhaps its modification in a way that will help the arbitration community accept it in its day to day practice.
Whilst many have pondered over what lies ahead, it may be helpful to take a step back and consider what may have caused the change in legislation.
This could assist in working towards a limitation of the instances where the cause occurs, and hopefully of the instances where Article 257 bites.
Whilst it would be difficult to determine the exact train of thought that was followed by the legislator just before Article 257 was drafted, there is little doubt that some degree of indignation by the losing parties to arbitral proceedings must have been part of the force that fueled the change.
After all, if losing parties were to habitually exalt the fairness and even-handedness of tribunals’ decisions, there would hardly be any reason for them to even suspect lack of impartiality, let alone contemplate its criminal prosecution.
Hence, it is arguable that there may have been an angry drive behind what is a very widely worded and far reaching penal law provision.
If this assumption is correct, one would have to ask what could have fueled the possible outrage. To do that, one would have to look at a typical arbitral award, the basic structure of which is generally as follows:
It starts off, as is normal, with the formal details of the parties and their representatives, together with some procedural background as to the tribunal’s appointment, swiftly followed by a summary of the dispute, this usually being a verbatim replication of previous submissions.
If there are any jurisdictional or authority related matters, these are set out and possibly dealt with as preliminary issues.
There follows a list of what a tribunal understands to be the main issues in dispute.
Each issue is then dealt with, again by adopting a verbatim “copy and paste” approach of exactly what each party had to say, all taken from past pleadings.
After both parties’ position on a given issue has been duly repeated, the tribunal opines as to which view it prefers and delivers its decision on that issue, often with very little analysis and very little reasoning preceding such decision.
Even if some reasoning is set out, this is almost always disproportionately limited in length and depth when compared with the preceding views of the parties.
The process is repeated for each issue and then the summary of the decisions is listed in the dispositive part.
Almost always the overwhelming bulk of a typical arbitral award in the UAE (and possibly beyond) consists of the parties’ positions.
Only a very minor part of that voluminous award is original text of the tribunal’s own assessment of what the parties have argued.
This is so, even though many institutional rules do dictate that the award must be reasoned, for example DIAC Rule 37.5, ADCCAC Rule 28.6. DIFC-LCIA Rule 26.2 and ICC Rule 32.2.
There is no definition of what constitutes reasoning, or reasons, and tribunals often take a rather minimalistic view.
They tend to hold, for example, that a tribunal has simply not been convinced that a given position applies over another or that a certain burden of proof has or has not been discharged.
Tribunals consider this as sufficient reasoning and promptly move on to uphold or reject an elaborately expressed position (concerning a head of claim of possibly tens of millions of dirhams), usually in the space of just a few lines.
It is true that arbitrators are generally very cautious not to stray beyond what has been pleaded, lest they touch upon a topic or a concept on which the parties have not had an opportunity to express their position.
Were a tribunal to introduce arguments in its reasoning that the parties see for the first time in the body of the award, this may lead to its nullification. Therefore, as far as reasoning is concerned, this is a potential limitation within the arbitral process.
Independent expert witnesses often reach conclusions within their reports based on experience and understanding of “best practice” where no evidence corroborating their findings actually exists.
A tribunal is then asked to accept the findings of one expert witness or another, simply because they profess to be an authority on a given specialised and usually highly technical matter.
At this stage, it is relevant to consider how the structure and contents of an award affects the readers, the first of whom are of course the parties.
As is common practice, the preferred way of reading an award is backwards.
That is to say, by starting from the dispositive part and if a disappointing item is listed therein, the reader then tends to try to find in the preceding text of the award why the tribunal reached that disappointing conclusion.
However, in doing so, the reader is unlikely to discover any illuminating thought process that could perhaps have a cathartic effect on any frustration caused.
Rather, what the reader usually finds, is that all the hard work and deep thought process, intricately crafted pleadings and eloquent writing, was summarily dismissed in just a few short paragraphs, which are in turn shrouded under a mysterious veil of undisclosed arbitral thought process.
It is perhaps easier to understand at that stage that, if this experience of unexplained rejection is repeated often enough, accusations of bias or even prejudice may start to proliferate.
It may be that some may have decided that the time has come to do something about this and it may be that their frustration eventually found its way to the listening ears of legislators.
It may be that their frustration eventually took the form of Article 257.
Or perhaps none of this is true or even likely.
The fact remains however, that investing more in reasoning is only going to help the arbitral process and appease the losing party.
It may in fact help both parties feel that the superior knowledge, wisdom and objective outlook of the arbitrators and experts (which are the presumptions upon which they were appointed in the first place) is, in fact, very helpful in strategising future dispute resolution.
The extent of reasoning must be limited to what has already been pleaded to avoid any risk of the award being nullified or set aside.
However, such risk would be limited and the need for a reasoned award may be satisfied, if the reworded arguments put forward by one party are compared with those of another and are set out in original text forming part of the tribunal’s decision.
It would be difficult then to imagine a party wishing to trigger Article 257, because any public authority or prosecutor would have to first plough through the tribunal’s thought process before the net decision is fully understood, let alone criticised for lacking impartiality.
A thoroughly reasoned decision (or opinion in the case of an independent expert) no matter how debatable such reasoning is, would be unlikely to be viewed as lacking impartiality.
By contrast, a decision in an award that comes across as cryptic, with laconic wording, or an expert opinion absolute in its determination and with minimal insight to its thought process, is more likely to raise suspicions.
And if suspicions are raised, then the arbitral community is left nervous and apprehensive, regardless of whether an Article 257 conviction is eventually confirmed, proven beyond reasonable doubt or not.
An award that is devoid of even a semblance of reasoning, may not necessarily be unjust but may lead to a sense of injustice.
A sense of injustice may lead to a desire to seek justice and this is now possible through the more arbitration-specific option afforded by Article 257.
It is common ground in a court judgment that comparatively less time and text is devoted to what the parties’ positions are with the emphasis leaning more on reasoned analysis of arguments and of any authorities put forward.
One may argue that court judgments set out their reasoning in a far more detailed manner because they are liable to an appeal.
Hence, it is imperative that the appellant court is aware of the reasoning adopted by the lower court before it can properly either uphold or overturn its decision.
In addition, Judges are less limited by what authorities or principles they can invoke, whether those have been raised by the parties or not.
One may also argue that arbitral awards are not appealable and hence the need for extensive reasoning is not as intense.
However, given the alarming possibilities afforded by Article 257, it is likely that an arbitrator, if faced with its application, will in any event have to explain the reasoning behind an award at one stage or another, probably in front of a prosecutor and probably as part of a defence or a proclamation of innocence.
Rather than doing so after the event and for the sake of desperately trying to avoid a jail term, it may best to invest the time in advance and simply include such reasoning, even in limited form, as part of an award.
Awards could be drafted with that thought in mind, so that their reasoning appears transparent and having taken on board (as opposed to merely repeating) the parties’ positions.
This would be a step in the right direction, regardless of whether the concerted efforts to repeal Article 257 succeed.
Aside from it serving as a potential method to avoid a jail sentence, basic reasoning would seem to be a natural ingredient of any award, simply because it is a key to a sense of justice being conveyed.
Ultimately, a sense of justice is what any party finding itself in an arbitral process expects to experience, whether it is victorious or not.
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|Publication:||Lexis Nexis Middle East|
How reasoned arbitration awards and expert opinions may help prevent Article 257 of the Penal Code being triggered